State-licensed cannabis companies and related businesses would gain broad access to insurance markets under legislation a bipartisan pair of U.S. House members introduced on Sept. 16.
Reps. Nydia M. Velázquez, D-N.Y., and Warren Davidson, R-Ohio, filed the Clarifying Law Around Insurance of Marijuana (CLAIM) Act to protect insurance companies from federal criminal prosecution should they choose to serve cannabis-related “legitimate” businesses. The legislation would also shield brokers, agents and insurers from civil liability.
The CLAIM Act, also sponsored by Sens. Kevin Cramer, R-N.D., and Ruben Gallego, D-Ariz., in the upper chamber, comes as adult-use cannabis remains a Schedule I drug under the Controlled Substances Act, and after President Donald Trump’s administration moved forward with reclassifying medical cannabis as a Schedule III drug in April. Both remain federally illegal under their respective classifications.
“Because of the conflict between federal and state law, insurers are still hesitant to write policies for cannabis businesses,” Velázquez said Wednesday. “That means thousands of legal small businesses are operating without a safety net. One fire or one storm could wipe out everything an owner has built, with no way to recover. The CLAIM Act fixes this by giving these entrepreneurs access to the same basic insurance protections every other legal business takes for granted.”
The CLAIM Act would free insurers of federal risks associated with serving those who handle cannabis or cannabis products, including the acts of cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing or purchasing.
The legislation comes as 42 states have legalized cannabis for medical use, including 24 that have also legalized it for adult use.
“Businesses operating legally under state law should be free to purchase insurance, and insurers should be free to serve them,” Davidson said. “The federal government should not use regulation to interfere with lawful commerce or override decisions made by the states. The CLAIM Act removes that federal interference and protects the freedom of insurers and their customers to do business.”
The 10-page legislation stipulates that federal agencies cannot “prohibit, penalize or otherwise discourage” insurers from “engaging in the business of insurance in connection with” a cannabis-related legitimate business; or a state, political subdivision of a state or Indian tribe that exercises jurisdiction over a cannabis-related business.
Federal agencies would also be barred from:
- terminating, canceling or otherwise limiting the policies of an insurer solely because the insurer has engaged in the business of insurance in connection with a cannabis-related business;
- recommending, incentivizing or encouraging an insurer not to engage in the business of insurance in connection with a policyholder, or downgrade or cancel the insurance and insurance services offered to a policyholder, solely because the policyholder is a cannabis business or is connected to a cannabis business; and
- taking any adverse or corrective supervisory action on a policy to a cannabis-related business or those connected to a cannabis-related business.
Nothing in the CLAIM Act requires insurance companies to serve cannabis businesses.
The legislation also directs the U.S. Comptroller General, through the Government Accountability Office (GAO), to study the barriers women and minority entrepreneurs face when entering the cannabis industry – such as the licensing process and access to financial services – and identify ways to expand access to the marketplace, reporting those findings to Congress.
A coalition of nine trade associations representing a majority of the companies, agents and brokers offering property-casualty, life, title and reinsurance in the U.S. endorsed the CLAIM Act on Sept. 8, writing to the bicameral sponsors that the insurance industry remains exposed to liability arising from federal-state conflict in cannabis laws.
“By resolving the legal uncertainty presented by the dueling state and federal treatment of marijuana, the insurance industry can serve both cannabis-related legitimate businesses and other commercial lines consumers, as well as personal lines consumers who may have a direct or indirect relationship to state-legalized cannabis, and still be in compliance with the law,” they wrote.
That coalition includes the American Land Title Association, American Council of Life Insurers, American Property Casualty Insurance Association, Council of Insurance Agents & Brokers, Independent Insurance Agents & Brokers of America, National Association of Mutual Insurance Companies, National Association of Professional Insurance Agents, Reinsurance Association of America, and Wholesale & Specialty Insurance Association.
